EU: European Union leaders meet in Brussels for a two-day summit today amid deepening gloom over the prospect of reaching a deal on the EU's next seven-year budget.
The leaders are expected to call a halt to further referendums on the EU constitution pending a "period of reflection" over Europe's political future.
Luxembourg's prime minister, Jean-Claude Juncker, whose country holds the EU presidency, told MEPs yesterday that a budget deal was now unlikely.
"I am pretty sure we won't get the financial perspectives through at this summit," he said.
There is broad agreement among the 25 member states on the size and shape of the budget but Britain is refusing to compromise on the future of its budget rebate, which is worth about €4 billion a year. All other member states want to freeze the British rebate at its current level and gradually phase it out, but London says it will only discuss changes to the rebate in the context of a complete budget overhaul, including big cuts in farm spending.
The Government will resist any attempt to reopen a 2002 deal that guarantees the level of spending on the Common Agricultural Policy (Cap) until 2013. Irish officials accept that, if a deal is agreed on the budget, Ireland will lose up to 85 per cent of the EU regional funds it currently receives.
European Commission president José Manuel Barroso warned yesterday of a "permanent crisis" in the EU if the leaders fail to resolve problems surrounding the constitution and the budget.
"If we don't succeed, the Union will sink into a permanent crisis and paralysis," he said.
Mr Barroso called for a suspension of the ratification process following the referendum defeats for the constitution in France and the Netherlands.
"The best thing to do now, the wisest thing, is to give ourselves time to reflect in order to try to save the constitution," he said.
The commission president declined to say how long such a pause in the ratification process should last but said it could be for more than a year.
The French prime minister, Dominique De Villepin yesterday cast doubt on any further EU enlargement beyond Romania and Bulgaria in the absence of the EU constitution. He said that concerns over enlargement expressed during the French referendum campaign should be considered carefully and that a thorough debate was needed before more countries are allowed to join the EU.
German chancellor Gerhard Schröder warned, however, that "new nationalisms" could be unleashed if the EU closed the door on other Balkan states.
The EU constitution suffered another blow yesterday when Germany's president said he would not complete ratification of it until a court ruled on whether the treaty conforms with Germany's own constitution.